Hershey's Bites Into China, Without Chocolate

Senior vice president Steven Schiller introduces Hershey's new candy, called Lancaster in English and Yo-Man in Mandarin.

North America's largest chocolate manufacturer Hershey's is veering away from tradition to bite into the world's fastest growing candy market with the launch of a new milk candy made especially for China.

The milk candy named "Lancaster" in English and "Yo-Man" in Chinese is Hershey's first new launch outside the U.S. in its nearly 120-year history - and the chocolate maker is betting big that the new product will pay off in China's $1.2 billion candy market.

"We've spent the last two years working with core suppliers, with our consumers and our customers to really develop something that makes sense for the Chinese palate," Steven Schiller, senior vice-president, global sweets & refreshment at The Hershey Company told CNBC Asia's "Squawk Box" on Wednesday.

The "Lancaster" brand will be available in three "Nai Bei" flavors, which refers to a candy making process that involves high-quality imported milk and slow cooking, will initially launch in cities Wuhan, Hangzhou and Chengdu in June, with wider distribution in 2014.

Daniel Acker | Bloomberg | Getty Images

"It's got a premium nature in terms of the slow roasting milk quality to it and we really think that we've hit on something that Chinese consumers are going to love," said Schiller.

Milk candy is the largest single category within China's sweets market, accounting for a quarter of all candy sold and is also the fastest growing segment at 20 percent, according to Schiller.

"The time seems to be right for a premium milk candy product that can really capture the hearts and minds of the Chinese consumers," he said.

Hershey's latest offering in the world's second largest economy comes after the U.S. company met with lukewarm success for its traditional chocolate products.

"We actually started with a more traditional caramel and we quickly found out that that's not where the taste preferences are in China," Schiller said. "The taste preferences and even the whole eating profile functionally of products are very different from what we know in the Western world."